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UK transition out of EU set to end 31 December 2020

Theresa May could concede to the EU's demand of an implementation period ending by 31 December 2020 Credit: PA

The prime minister is poised to concede to the European Union's demand that the transition to full exit from the EU - what Theresa May calls the "implementation period" - will end on December 31 2020, which is a few months earlier than she had initially hoped.

A government source told me that although it would be useful to have longer to prepare the UK for life outside the single market, customs union and other important EU structures and institutions, it was just "too complicated" to negotiate what to pay for additional transition months.

The problem is that the EU's current budget arrangements - or multi-annual financial framework (MFF) - terminate at the end of 2020, so it is impossible to calculate what a fair payment would be for continuing to trade with the EU on current terms after that.

"In the end it is simpler for implementation to be aligned with the MFF", said a source.

The agreement on the end-date should be announced in 11 days, at the EU summit which is supposed to agree the transition arrangements and the guidelines for negotiations on the future trading relationship between the UK and EU.

There will be unease among some businesses that the transition is set to end as early as that, because they will worry that the minutiae of future trade and security arrangements between the UK and EU would not be finalised by then.

Also businesses are not confident that the UK will have put in place all new systems and infrastructure necessary for our post-Brexit existence, such as improved facilities at ports and borders for vetting exports and imports.

A formal agreement has not yet been agreed Credit: AP

It is not yet certain that the summit will agree the transition arrangements at the EU summit, because of a continued dispute between the UK and the EU about how to guarantee that there will be no hard border between Northern Ireland and the Republic of Ireland.

But it is now likely that the UK will be formally outside the EU on March 30 2019 and will cease to enjoy the full rights of membership after 31 December 2020 - which is less than three years away.